AfDB throws Kenya new debt lifeline amid Eurobond jitters

The African Development Bank (AfDB) has pledged a new liquidity lifeline for the cash-strapped Kenya Kwanza administration to settle its maturing obligations amid mounting concerns about Kenya’s repayment ability. 

The pan-African lender said on Wednesday it is in talks with the National Treasury on how to help deal with some of Kenya’s massive obligations that have triggered widespread default concerns. 

“The bank is engaged in negotiations with the National Treasury to explore ways to use guarantee instruments (guarantee schemes) that enhance Kenya’s ability to access global financial markets to finance its budgetary needs,” said AfDB in emailed responses to The Standard’s queries. 

“The bank is currently engaging the Cabinet Secretary National Treasury, Professor Njuguna Ndung’u, on how best to leverage the country’s reserves as guarantee to mobilise additional resources to support repayment of maturing bonds and other debt obligations.” 

AfDB Secretary General Vincent Nmehielle told The Standard separately in an interview Kenya has shown “the ability to meet its maturing debt obligations.” 

“The partial payment of the maturing Euro bond of June 2024, is a testament to the government of Kenya’s ability and desire to meet its debt obligations,” he said while allaying fears of the possibility of a default for Kenya,” he said. 

AfDB approved budget support to Kenya last year amounting to Sh12.8 billion. The loan is expected to be finalised this year ahead of disbursement.  The bank said once this is done, another budget support operation of an unspecified amount is expected to be processed in the third quarter of this year. 

Professor Nmehielle spoke ahead of the 59th Annual Meeting of the Board of Governors of AfDB, which will be held from May 27-31 at the Kenyatta International Convention Centre (KICC).  The theme of the meeting, which will bring African Finance ministers and heads of government to Nairobi, will be Africa’s Transformation and Reforms of the International Financial Architecture. 

“The objective of the theme is to bring to the fore the urgent need for reforms of the international financial architecture to mobilise resources at scale and accelerate the pace of Africa’s structural transformation,” said Prof Nmehielle. AfDB is set to give Kenya a financial lifeline at a time economists have issued a fresh dire warning, emphasising the urgency for the Ruto government to take immediate action to avert a potential economic collapse caused by the impending Sh320 billion Eurobond repayment in just five months. 

The repayment plan for Kenya’s $2 billion (Sh334 billion) Eurobond, which is scheduled for June this year, has sparked controversy and is being keenly watched by global investors.